The novel coronavirus and the resultant social distancing
have messed up the economy, thanks to travel restrictions, business shutdowns
and major supply-chain bottlenecks. These hurdles weighed on corporate results
of companies across several sectors in the recently-reported first-quarter
earnings cycle. As the pandemic started hurting businesses around mid-March,
the second quarter stands in an even worse position, with the results of many
companies expected to be under pressure.
Although bans are being lifted and businesses are gradually
reopening, the constant rise in the number of cases has set in fears of a
second wave of the crisis. And with no vaccine discovered yet, there is a lot
of uncertainty surrounding the duration and severity of the virus. With so many
qualms plaguing investors’ minds, dividend-paying stocks seem like a tempting
option at the moment.
Dividend Stocks From the Defensive Zone: A Win-Win Situation?
Although companies across many sectors suspended buyback
activities and dividend payments to preserve financial flexibility amid the
crisis, there are players in the Consumer Staples universe, which are
continuing with dividend payment practices even amid such difficult times. This
tells a lot about their sustainable business models, long track record of
profitability, rising cash flows, solid liquidity and some value
characteristics.
In fact, the defensive Consumer Staples sector has always
been a go-to place for investors. At a juncture where most sectors are
grappling with coronavirus-led disruptions, many companies from the consumer
staples space are gaining from burgeoning demand for essential items amid the
coronavirus-led stockpiling. That said, investing in consumer staple dividend
stocks seems to be the right thing to do at present.
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